STRENGTHS

Increased importance of gold production (4th largest producer in Africa)

Member of the WAEMU

Good record on economic policy and implementation of structural reforms

Support of the international financial community (one of the first countries to have benefited from the HIPC initiative)

WEAKNESSES

Economy highly exposed to weather conditions,

Vulnerability to movements in cotton and gold prices

Heavily dependent on foreign aid

Weakness of electricity infrastructure

Demographic pressure and very high level of poverty

Risk assessment

Faster growth thanks to stabilisation of the political situation and firmer commodity prices

Having slowed in 2014 and 2015 because of the drop in commodity prices and political instability, growth picked up in 2016. In 2017, the recovery will continue, driven by a resumption of investment (blocked during the democratic transition) especially in the mining sector, with increased gold production and higher cotton prices. After a record output of 40 tonnes of gold in 2016, production is projected to increase further in 2017, as the start of operations at new mines in 2016 and 2017 are expected to increase production. Moreover, reform of the mining code and stabilisation of the political situation are expected to favour an acceleration in FDI flows. After three years of substantial decline, the price of gold recovered in 2016 and is expected to stabilise in 2017, such that it is able to maintain the contribution of the gold sector to growth. Likewise, the slight recovery in the price of cotton, the second most important source of export income, and a 2016/2017 harvest which promises greater yields, will help boost the acceleration in growth. Cotton production is projected to increase despite the decision within the industry, dissatisfied with the quality of the fibre, to abandon GMO cotton cultivation, which had reached 80% of the total crop during the 2014/2015 season. Higher private investment is expected to sustain private consumption, which should encourage job creation. Demographic trends and spending under the National Plan for Economic and Social Development (PNDES) 2016-2020 will also support growth. Nonetheless, the lack of infrastructure will still hamper activity, with the electricity supply, in particular, remaining an obstacle to more sustained growth.

Inflation, which is still sensitive to food price fluctuations, and accordingly to weather conditions, is likely to edge up in 2017, bolstered by the pick-up in private consumption.

Fiscal efforts not enough to reduce deficit without foreign aid

The budget deficit excluding grants is expected to widen in 2017 despite the increase in government income. The widening deficit is, in particular, linked to higher government investment under the PNDES 2016-2020. The 2017 budget therefore includes an extra 520 billion CFA francs approximately (about EUR 800 million) compared with the past year. To reach the public investment budget objectives, the country will remain dependent on international funding partners. So, in 2017 the World Bank's Bagre Growth Pole Project for Burkina Faso will again complement the government's own investment. Efforts to reduce public sector costs undertaken by Prime Minister Paul Kaba Thieba, which resulted in savings of about EUR 3 million in 2016, are expected to continue. Including grants, the country will maintain a budget deficit of around 3%, as in 2016. The debt is expected to stabilise at a moderate level.

Higher mining output, specifically gold, should help boost export revenues and bring down the current account deficit in 2017. The import bill is projected to rise moderately in line with oil price movements. Remittance flows will not contribute enough to offset the trade balance deficit, so the current account deficit will remain relatively high.

A process of stabilisation of the political situation, which remains vulnerable

The political scene was destabilised by the popular uprising in October 2014, which led to the fall of Blaise Compaoré after 27 years in power and was followed by the attempted military Coup d’Etat against the transitional government in September 2015. The election of Roch Marc Christian Kaboré with 53.5% of the votes cast in the presidential elections held in late 2015, which went off fairly smoothly and transparently, followed by the appointment of Paul Kaba Thiéba as Prime Minister brought stability to the political situation. Former right-hand adviser to Compaoré, Kaboré stepped down from office and from the leadership of the ruling Party for Democracy and Progress (CDP) to found his own party, the Movement of People for Progress (MPP) in January 2014, which, eighteen months later, won a relative majority in the National Assembly. Hit by poverty, unemployment and corruption in an environment offering limited economic possibilities, political and social stability will remain precarious in 2017, while supporters of Compaoré will be on the lookout for a false move by the elected government. Poor-quality infrastructure (transport, electricity, justice, health, education) makes for a difficult business climate (146th out of 190 according to the World Bank's Doing Business Report 2016). Regional security will also be a challenge for the country, which was the victim of an Islamist attack on a hotel in Ouagadougou leaving 28 dead in January 2016. The threat from Islamist groups in the Sahel is an obstacle to overall current prospects of political stability and investment.